Most individual tax-payers plan their investments with an eye on tax benefits available. According to Section 80C of the Income-Tax Act, 1961, a tax deduction up to R 1 lakh is available for specified investments/expenses during the financial year (April 1, 2011, to March 31, 2012). Additionally, exemptions can be claimed on expenditure like rent, education fee and insurance premium, or investments like long-term infrastructure bonds under different sections of the Act.
Salaried taxpayers should ideally plan their investments early as they need to provide their details to the employers. Employers take these investment declarations during the beginning of the year and deduct tax every month. Towards the end of the year, employers request their employees to provide proofs of actual investments to finalise the employee tax liability.
Most employers have already sent a mandate to employees to provide their proofs of investments and some are in the process of sending them. Hence, it?s important to keep the documents ready so that taxes are deducted correctly. As a thumb rule, while submitting investment proofs, you need to ensure that investment proofs being submitted are in your name.
The proofs can be in the name of spouse/children in specific cases where the Act provides. The documents, receipts, etc, pertain to the current financial year and, in case of investments in Public Provident Fund, ensure that ,besides the receipt, a copy of the passbook page showing the deposit entry is also submitted if required by the employer. The employer may require you to self-attest the documents.
If you are claiming exemption from House Rent Allowance, then, you need to submit the rent receipts to the employer. Your employer may also insist on a lease deed or bank details to ensure that the amount has been genuinely paid to claim the exemption.
As per the latest TDS circular (No. 05/2011 dated August 16, 2011) issued by the income tax office, the landlord?s PAN is required to be mentioned in case the rent exceeds R15,000 per month.
In many cases, it may be possible that your insurance premium payment date falls after the timeline provided by your finance department.
Employers recognise this problem and, therefore, usually accept copies of previous year receipts with a signed declaration for the date of investment. In such a case, the actual proof of investment in the current financial year needs to be submitted before March. In case of failure to submit the proof of investment, the employer may not provide you the tax deduction.
It is a good practice to keep a copy of the original documents provided to your employer if your employer
insists on submitting the originals for verification.
– The writer is partner, KPMG